Key takeaways on the US Housing Market from the Harvard Joint Center for Housing Studies' annual report on housing (2023)

The US Housing Market is experiencing a time of turmoil. The unsheltered population has increased by 35% from 2015 to 2022 with the addition of 60,560 people. Housing is becoming increasingly unaffordable for the nation’s low-income households. We documented this gap in demand and supply in our Housing Count Project and found a national shortage of 4.5M units for the low-income and very low-income population of the country. 

Take a look at some of the key statistics about the US housing market, published by the Harvard Joint Center for Housing Studies.

Homeowners are ‘quiet quitting’ the U.S. housing market

According to several economists, something big is happening in the US housing market, but in the shadows. The unusually low new home listings in April, which traditionally is a peak time for houses to go on sale, has prompted several to economists to draw attention to homebuyers ‘quiet quitting’ the housing market. This term became popular during the pandemic, to describe workers who were doing the bare minimum in their jobs and gradually trying to extract themselves from their roles. Below are some other interesting statistics around homeownership:

  • Rise in cost-burden for homeowners - Between 2019 and 2021, the number of homeowners spending more than 30 percent of their income on housing costs jumped by 2.3 million households, the largest increase in cost-burdened homeowners since the height of the housing boom in 2005–2007
  • Overall homeownership rate increased -According to Housing Vacancy Survey data, the number of homeowner households increased by 1.5 million between 2021 and 2022, slower than the rapid 1.9 million average annual growth rate observed between 2019 and 2021 but still greater than the rate heading into the pandemic.
  • Home purchases by first-time homebuyers is rapidly declining - The number of purchase loans originated to first-time homebuyers decreased 22 percent in 2022. By the fourth quarter of 2022, lending to first time homebuyers was down nearly 40 percent relative to a year earlier.

US Housing Market 2023 - the market continues to cool even as homeowners and renters face higher costs

A lot of people were wondering this year - will the US housing market crash in 2023? Thankfully, the possibility of that has been dispelled given the data. In response to the rising interest rates and the deteriorating housing affordability across the country, demand for housing has softened and the markets have cooled by early 2023. There has been a month-over-month decline in housing prices in the for-sale market until July 2022. This is the first time that this happened in over a decade. In 25 of the 100 largest metro areas, home prices fell year over year, with the steepest declines in markets in the West and South, including Austin, Boise, and San Francisco.  

A substantial drop in demand in the second half of 2022 cooled rental markets

Asking rents in two of the 50 large markets (Phoenix and Miami) had risen about 25 percent annually in early 2022. In the first quarter of 2023, rents in these two markets declined outright year over year. Overall, since recording a 15.3 percent year-over-year rise in the first quarter of 2022, asking rents in the ‘professionally managed apartment sector’ have moderated significantly.

Despite slowing growth, home prices remain near record highs

Nominal home prices declined year over year in fully a quarter of the 100 large markets tracked by the Freddie Mac House Price Index in March 2023, compared with zero metros a year earlier. Although national home prices have declined in the past several months, between February 2020 and February 2023, nominal home prices jumped a stunning 37.5 percent, or 17.5 percent after accounting for inflation. Nominal home prices since 2010 have more than doubled—rising 102.2 percent—while real home prices have climbed 51.5 percent.

Source: JCHS tabulations of RealPage data; S&P CoreLogic CaseShiller US National Home Price Index.

Investor demand for single-family homes softens but remains strong

As interest rates rose in late 2022, investor home purchases fell significantly from their pandemic levels. However, there remains a strong trend in investor purchases, given that owner-occupant homebuying has fallen sharply. Investors bought 26 percent of single-family homes in the fourth quarter of 2022, just shy of the record-high 28 percent share recorded in early 2022.

Rising rental vacancies - new leasing traffic plunged in the second half of 2022

The second half of 2022 recorded the first drop in annual apartment demand since 2009. Leasing has only picked up slightly in early 2023 with a net addition of 19,000 new renters in the first quarter. By the first quarter of 2023, vacancy rates had climbed to 5.2 percent, above the 4.8 percent vacancy rate averaged in 2015-2019.  

Single-family construction slowing - Multifamily construction thriving 

Reacting to higher borrowing costs such as high-interest rates and the rising cost of construction, the single-family building sector noted a sharp decline. 

  • Single-family housing starts dropped 10.8 percent in 2022. 
  • An average of 876,000 new units were added in the second half of the year, down by a stunning 23.2% compared to the same period in 2021. 

On the other side, there has been continued growth in multifamily starts, even though rental demand has softened across markets. 

  • 547,000 new multifamily units were started last year, the highest number since the mid-1980s. 
  • 960,000 units in multifamily buildings were under construction as of March 2023, the highest number in half a century.
  • 342,000 multifamily rental units were added in 2022 alone, mostly targeting the high end of the market. In the third quarter of 2022, the median asking rent for new units reached $1,805, an increase of $125, from the $1,680 median in the third quarter of 2015 after adjusting for inflation.
  • The rising rents can be attributed to the high price of land in the most expensive metro areas as well as an increase in amenities such as in-unit laundry. 
Source: JCHS tabulations of Freddie Mac, Primary Mortgage Market Surveys; National Association of Realtors (NAR), Existing Home Sales.
Bottomline - While multifamily rental construction is at a decades-long peak, the high asking rents of new units make them unaffordable for many households. 

Historically low population growth poses challenges to long-term household growth

According to the report, population growth is the primary long-term driver of

household growth. Unfortunately, population growth remains historically low in the US. There has been a 0.38% rise in the US population, which only grew by 1.26 million people in 2022. The US population growth hit 100-year lows consecutively in 2019, 2020, and again in 2021. 

  • Population growth is determined by “natural” growth—the net of births minus deaths—or immigration. 
  • In the 2000s and early 2010s - natural growth slowed from 1.7 million to 1.4 million per year. Net gains from immigration fluctuated between 800,000 and 1.2 million.
  • The late 2010s - decline in both natural growth and immigration. Annual gains from immigration ultimately dipped below 400,000 and natural growth dropped to less than 150,000 in 2021.
  • In 2022 - annual gains from immigration rebounded to 1.0 million while annual gains from natural growth remained at a modest 245,000 
  • Deaths are projected to outnumber births beginning in 2043 - according to the Congressional Budget Office, if this happens in 2043, population growth will rely entirely upon immigration. 
Source: JCHS tabulations of US Census Bureau, 2022 Population Estimates Program.

Shifting geography of housing demand - rise in domestic migration

The domestic migration trends continue to rise. Among the 20 states and the majority of counties that experienced growth in 2022,  domestic migration was the largest source of population growth. People are moving away from bigger metros and cities where the cost of housing and living is skyrocketing. As a result, suburbs, rural areas, and smaller metros are experiencing residential growth. A lot of this mobility has been fueled by widespread remote working policies and housing affordability concerns.

  • Urban counties in large metros with populations over 1 million lost more people from moves in 2022 than in 2019.
  • California, New York, and Illinois saw the largest number of net moves out of state, and states in the South and Mountain West gained the most population from interstate moves in 2022.
  • In 2022, the population gains in Southern states grew larger, while losses increased in states along the Pacific coast and the Northeast.
  • Local mobility trends declined, given that the share of households moving within their county dropped by nearly half, from 8.3 percent in 2010 to 4.8 percent in 2022. This can be attributed to the availability of fewer homes for sale or rent.

Key housing challenges that need to be addressed going forward

The national housing shortage needs to be addressed

Problem - rising construction costs, restrictive zoning laws  

  • The rising cost of land, labor, and building materials are acting as the primary impediments to new constructions across the country
  • There is a severe shortage in affordable and available homes, especially for low-income and very low-income populations.
  • The price of inputs to new residential construction has increased 35 percent since the start of the pandemic.
  • Local restrictive zoning policies and other regulatory barriers make it difficult to build a range of housing types at different price points.
Source: JCHS tabulations of US Bureau of Labor Statistics, Producer Price Indexes

Solution -  use of alternative construction techniques, zoning amendments

  • Off-site construction can reduce construction times on a 3- to 4-story multifamily building by at least 40 percent and costs by 20 percent. Adaptation of off-site construction has been slow owing to high up-front costs and lack of financing for off-site techniques.
  • Accessory dwelling unit (ADU), is an ideal local tool for addressing housing affordability. It is essentially infill housing and can help increase supply in communities with limited available land
  • States can use legislation to reduce local zoning barriers. For example, in 2023, Montana and Washington passed sweeping reforms allowing other types of housing on parcels previously zoned exclusively for single-family homes.

Climate change poses an immediate and acute risk to the housing market 

Problem - nation’s housing stock at risk from increasingly frequent disasters

  • More than 14.5 million homes were affected by climate-related hazards—such as hurricanes, wildfires, and hail— in 2021, amounting to $56.9 billion in damage from large events. 
  • 59.9 million homes in areas with moderate expected annual losses from hazards, face grave future risks. 
Sources: JCHS tabulations of Federal Emergency Management Agency, November 2021 National Risk Index EAL data; US Census Bureau,2021 American Community Survey 5-Year Estimates

Solution - knowledge sharing, funding for prevention of risks and better construction techniques

Read the full JCHS report here

Sumedha Bose
Builders Patch Staff

Sumedha is a seasoned urban policy expert specializing in international housing policy. Armed with dual Master’s degrees from the prestigious Tata Institute of Social Sciences in Mumbai and Institut d’études politiques in Paris, she brings a wealth of knowledge and international perspective to her field.